Market Appraisals Level 2 - HMO SE London Flashcards
Talk me through your appraisal of the HMO in South East London
I was instructed by a client to carry out a market appraisal to assess disposal options as part of a pre receivership appointment
the property was a mid terrace freehold six bedroom HMO with front and rear gardens
I ensured I was competent to carry out the appraisal and carried out due diligence on the property.
I carried out an external inspection of the property noting specification and local area.
I collated a report together which contained property description, current tenancies and market conditions.
Described the property
6 Bedroom HMO
- decorative balconies
- large windows with external brickwork
- wooden framed porch
front and rear garden
What due diligence did you carry out?
I checked if the property had a HMO licence.
What would you have done if the property was occupied as a HMO without a HMO licence?
I would inform the local council immediately and look to obtain a temporary exemption notice.
What is the HMO requirements in the Council?
Lambeth Council - required for 5 or more rooms.
What are the requirements for HMOs?
Varys across London
some boroughs require HMO licence for 3 or more people who are not from the same household.
others it if the HMO is rented to 5 or more people who form more than 1 household
How did you appraise the property?
Spoke to local agents and understood that at the time investors were targeting a gross yield of 7%
I looked at rentals on a per room basis as well as if it was to be reconfigured into a house and established the ERV
I considered the Guide Price for Vacant Possession and subject to ASTs in place.
How did your Vacant Possession Value differ from Market Value subject to ASTs?
Applied a discount as if purchasing with ASTs in place investors would have to take into consideration management costs, reletting rooms, utility costs, compliance with regulations.
What economic factors are affecting pricing in the HMO Market?
- effect on the profitability of HMOs in rise in mortgage rates and utility rates, yields are moving out to reflect this
- new fire safety regulations - responsible person needs to be appointed for HMO ensure compliance. More management intensive.
What are the HMO fire compliances?
I am not sure of the exact compliances however I am aware that you can contact the local council who will set up a meeting with an officer who advise on requirements for the property.
What use class is HMO
C4
How would you deal with a situation where there was little comparable evidence?
I would ensure that I was still competent to take on the appraisal
I would widen my search for evidence in terms of location and time frame
I would factor in current market conditions and note in my reporting the lack of comparable evidence and uncertainty.
Was there any property specific attributes or limitations which affected pricing?
I checked that the property had planning permission and a HMO licence.
Was an inspection or survey undertaken?
Yes I inspected the property and obtained relevant details on the property.
How do terms of engagement work in market appraisals?
In auctions we carry out an initial desktop appraisal to give an indication of guide price with our agency terms attached.
If the seller wishes to proceed we will carry out an inspection and market appraisal which will provide a written report to our client with our thoughts on recommended pricing.
